Sunday, April 9, 2017

Why Mauritius Has No Money For Capital Budgets

It's not really because of the capital projects undertaken by the previous Government namely the new airport terminal and the ring road. And the sums that may be needed to rehabilitate them. The main reason is the regressive flat tax and the extensive damage that has been done to the economy to keep it at 15%. There was 927 billion of GDP missing at the end of 2016 -- aka the Sithanen toohrooh -- and if we assume that government would have reduced its revenue as a share of GDP to 15% it's missing 139 billion rupees. If it kept it at 20% then there's 185 billion rupees of government revenue missing.

What can you buy with Rs185 billion? Something like the Dubai metro or the one considered by the city which pioneered the bus rapid transit (BRT). But we don't need that kind of metro although we should have been able to afford it were it not for a massive ministerial skills mismatch. We don't need a scaled down version of the Metro Leger either simply because the flat tax has placed our public finances on an unsustainable track. There are better and urgent ways of handling the traffic Frankenstein.

Even more urgent is to restore some sanity to our public finances. Not a bad idea as how can Lepep deliver an economic miracle in year 4 when it cannot organically generate money for capital budgets 12 months before?